SNAPDEAL - Company Analysis w.r.t Strategic Management

1. Snapdeal.com
A BRIEF
COMPANY ANALYSIS
OF
snapdeal.com
bachatey raho!!
By
ANAND PRABHUDESAI
14020448076
MBA EE 14-17 WEEKDAY BATCH
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2. Snapdeal.com
Snapdeal.com is the fastest growing e-commerce company in India - HQed in New
Delhi.
The company was started by in February 2010 by Kunal Bahl, a Wharton graduate and
Rohit Bansal, an alumnus of IIT-Delhi.
A quick SnapShot of Snapdeal.com
Type Private
Industry Internet
Founded 2010[1]
Founder Kunal Bahl & Rohit Bansal
Headquarters New Delhi, India
Area served India
Key people Kunal Bahl & Rohit Bansal
Services E-commerce
(Online shopping)
Number of employees 2000+[2]
Slogan Bachatey Raho!
Website www.snapdeal.com
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3. Snapdeal.com
History
Snapdeal.com was started in February 2010 as a daily deals platform inspired
by groupon.com but expanded in September 2011 to become an online marketplace.
Snapdeal has grown to become the largest online marketplace in India offering an
assortment of 4 million+ products across diverse categories from over 50,000 sellers,
shipping to 5,000 towns and cities in India, offering more than 6,000 brands across 500
categories. It has 25 million members and adds a new product every 20 seconds. – 2014
data
Funding
Snapdeal has received 6 rounds of funding:
1. Round 1: In January 2011, Snapdeal received a funding of $12 million from
Nexus Venture Partners and Indo-US Venture Partners.
2. Round 2: In July 2011, the company raised a further $45 million from Bessemer
Venture Partners, along with existing investors Nexus Venture Partners and Indo-
US Venture Partners.
3. Round 3: Snapdeal then raised a 3rd round of funding worth $50 million from
eBay and received participation from existing investors – i.e. Bessemer Venture
Partners, Nexus Venture and IndoUS Venture Partners.
4. Round 4: Snapdeal received its 4th round of funding of $133 million on Feb-
2014. The 4th round of funding was led by eBay with all the current institutional
investors, including Kalaari Capital, Nexus Venture Partners, Bessemer Venture
Partners, Intel Capital and Saama Capital all participating.
5. Round 5: Snapdeal received its 5th round of funding of $105 million in May-
2014. The 5th round included investments by Blackrock, Temasek Holdings,
Premji Invest and others. The round valued SnapDeal at $1,000,000,000.
6. Round 6: Snapdeal received its 6th round of funding in Oct-2014 from Softbank
with investments worth $627 million in fresh capital.This makes SoftBank the
largest investor in Snapdeal.
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4. Snapdeal.com
Acquisitions
• In June 2010, Snapdeal acquired Bangalore-based group buying site,
Grabbon.com
• In April 2012, Snapdeal acquired esportsbuy.com, an online sports goods retailer
from Delhi
• In May 2013, Snapdeal acquired Shopo.in, an online marketplace for Indian
handicraft products.
• In April 2014, Snapdeal acquired fashion products discovery site, Doozton.com.
• In December 2014, Snapdeal acquired gifting recommendation site,
Wishpicker.com.
• In January 2015, Snapdeal acquired a stake in product comparison website
Smartprix.com.
Business Results
In the year 2012-13 Snapdeal had said that it expected revenues of about
600 crore (US$94 million). Betting big on the growth of mobile commerce, Kunal Bahl,
the CEO, said at the time that 15-20 per cent of the sales on Snapdeal came through m-
commerce.
Snapdeal.com expected the total sale of products traded on its platform to cross
2000 crore (US$310 million) in the fiscal year 2013-14 helped by its robust growth in
the past two years and the growing popularity of e-commerce in India.
They achieved a growth rate of 400% year-on-year since inception.
In June 2014, Snapdeal announced that it had achieved the milestone of 1000 sellers on
its platform getting sales of over Rs 1 crore.
Snapdeal has 70% market share in the local merchant deals space, and is the largest e-
retailer of watches, sunglasses, jewellery, perfumes, among other categories in India,
delivering to 3000+ cities and towns in India.
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5. Snapdeal.com
1 out of every 8 internet users in India is subscribed on Snapdeal, and the company is
growing at the rate of 2 million new subscribers per month.
Awards
• E-Retailer of the Year & Best Advertising campaign of the year - Indian E-Retail
awards 2012 organized by Franchise India in Feb,2012.
• Winner of Red Herring Asia Awards 2011.
• E-commerce site of the year at WAT awards that took place in Jan 2012, Mumbai.
• Voted amongst the Buzziest brands of India in afaqs's annual buzz-making poll.
Strategic Decision Making
In September 2011, Kunal Bahl, took a decision with significant impact on his business
– transitioning from a pure online deals site to a full-fledged horizontal e-commerce
company via a marketplace model.
Such a change was not new to Bahl, as he had started his entrepreneurial journey back in
2007 as a physical discount coupons player and only in 2010, he had pivoted to daily
deals.
Daily deals comprise only 5 per cent of Snapdeal’s overall business while e-commerce
comprises the rest.
According to Bahl, all these pivots were a part of considered, strategic thinking, rather
than opportunistic or tactical moves.
Snapdeal has moved quickly from selling coupon books to deal vouchers online to a
product marketplace now.
Such quick pivots look more opportunistic than a natural evolution.
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6. Snapdeal.com
Working Model
Behl clearly saw that globally, there is an increasing trend towards leveraging a
technology platform (rather than owning inventory) and hence his business model is
different than the competitions inventory-led model.
What Behl says is that the inventory-led model does not necessarily allow you to have
much control. There are certain advantages of the inventory-led model but they come at
a crazy cost. Inventory is just a very expensive way of marketing and people will often
hold inventory to claim that they will ship it fast, and that eventually becomes their
marketing claim.
Snapdeals’ philosophy is that it will try to be as fast in deliveries as it can.
Though there is a huge dependency on merchants & less control, but a merchant will
deliver because he realizes that the sales he is getting through SnapDeal platform are
potentially impacting his income
Integrating vendors with technology is a crucial aspect of the marketplace model.
Many a times, vendors are not ready for such integration because they don’t have the
resources for it.
A marketplace model like Snapdeal needs to ensure that technology integrations work
seamlessly and this is what Behl is trying to achieve constantly.
The powerful model of local merchant & physical product e-commerce is something
which is very unique to Snapdeal.com, and it gives the opportunity to provide wider
variety of choice to the customers.
Snapdeal is thus a very conservative company in making investments.
Company culture is more about how to do more with less.
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7. Snapdeal.com
Company Building & Target Market
SnapDeal believes that basically, there are five key stakeholders in this kind of business
• Customers
• Customer support
• Technology platform
• Merchants
• Logistics.
Thier goal is to figure out how to strengthen the linking among these five as each one
interacts with multiple of the others.
They have around 120 people in thier engineering team and interviewed around 4,000
candidates to build this team. Technology is the single biggest expense in the company.
Every line of code in Snapdeal is written in-house as they don’t outsource anything and
don’t use other platforms. They believe that If you want to build a fast-moving and agile
platform, you need to build it yourself.
Their goal is simple - to keep providing the three things, which are important to the
customer – Value, Assortment and Convenience.
Their approach is very simple – stay lean, focus on important things, and know what
your value drivers are and keep working towards them.
The company is tapping customers in non-metros and tier-II and tier-III cities; 60
percent of its sales come from these areas, and Snapdeal is hoping to widen its reach.
“Urban India has access to offline stores. Our focus is on places where they can’t get the
product they desire,” says Kunal Bahl.
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8. Snapdeal.com
Competition & Market Share
The intensity of competition has heightened over the past 2-3 years. And the fight for the
top slot in the $3.1 billion Indian ecommerce industry has evolved into a three-way
tussle:
Flush with funds, they are now vying for customer mind space and wallet. But the lack
of brand loyalty coupled with the absence of any major differentiators in terms of
offerings and services is fast emerging as their biggest challenge. Promises like cash on
delivery (COD), assured delivery, no-questions-asked replacement policy, zero
cancellation fee, free shipping and EMI options are no longer good enough for
customers.
Global biggie Amazon Inc, with a $143 billion market cap, entered India last year and is
the most deep-pocketed.
Bangalore-based Flipkart, with its recent funding of $210 million from Russian firm
DST Global Solutions, has now received nearly $780 million in funds since it started
operations in 2007. It recently paid $300-330 million to acquire rival Myntra (India’s
largest fashion etailer) to strengthen its position in the fashion space.
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9. Snapdeal.com
With their sights clearly set on the long term, for Amazon, Flipkart and Snapdeal, there
is only one objective—customer acquisition; while the cost of acquisition is spiraling
skyward thanks to their capital-intensive investments.
The entry of Amazon has brought an added sense of urgency and competitiveness in the
industry, say experts. This is visible in the aggressive advertising in the space. “Spends
on marketing and promotion have gone up significantly and communication to the
customers is more intense,
As Deepak Srinath, director, Allegro Capital Advisors, points out: “Of the three, Flipkart
is the strongest brand right now. But in the long term, Amazon will lead over the others
on the back of its expertise, technology and access to capital. Amazon does not need to
raise capital from outside in the next 10 years.”
But the only guarantee that these firms are currently seeking is opportunity. With
Nasscom estimating the Indian ecommerce industry will reach $100 billion by 2020,
they have that assurance in hard numbers.
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10. Snapdeal.com
Please note that the revenue figures above are not the price of products sold (GMV), as
these are all marketplaces, and their revenues come from commissions they get from
sellers or listing fees that they charge to list the products on their site.
GMV or Gross Merchandize Value represents the price of products sold and net
revenue is just a fraction of that!
Flipkart leads the race with net revenue of 179 crore followed by Amazon at 168.9 crore
and Snapdeal at 154.11 crore.
However, when it comes to losses, Flipkart leads by a much bigger margin and their loss
for 2013-14 stands at Rs. 400 Crore. Comparatively, Amazon losses are pegged at Rs.
321.3 crore and Snapdeal had least losses of 3 with 264.6 crore
SWOT ANALYSIS
STRENGTHS
1. Visionary Leadership under Kunal Behl
2. Strategic goal setting and achievement
3. Technology centric company philosophy
4. Out-of-the-box thinking in business line.
5. Good funding received from time to time as company grew.
WEAKNESSES
1. Technology led model might collapse if the logistics network is not trained
constantly
2. Small time entrants entering into market share end up as competition.
3. Cut throat competition from big rivals like Amazon and FlipKart might end up
changing company’s policies and work models.
4. Customers are already finding FlipKart faster by a day or 2 due to its inventory based
model.
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11. Snapdeal.com
OPPORTUNITIES
1. Rural Indian untapped market.
2. Tier 2 & 3 Cities focus.
3. MOBILE revolution hitting new figures every year.
THREATS
1. Big market players like AMAZON and FLIPKART
2. Threat of Walmart making an entry in India
3. Threat of the world leader in e-commerce Alibaba.com making an entry in India
4. Ever changing tax structures and policies of the government might impact business
any day.
Revenue Goal for SnapDeal
By end of 2015 – 1 Billion USD in GMV is their long term Revenue Goal and going by
the current trends, Snap Deal is sure on its path to achieve it !!
Till then – BACHATE RAHO !!
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12. Snapdeal.com
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